SS&C Techs. Holdings, Inc. v. Endurance Assurance Corp.

• Decision Date: 29 October 2020
• Docket Number: C.A. No. N20C-01-088 EMD CCLD
• Court: Delaware Superior Court
• Parties: SS&C TECHNOLOGIES HOLDINGS, INC., Plaintiff, v. ENDURANCE ASSURANCE CORPORATION, Defendant.

SS&C TECHNOLOGIES HOLDINGS, INC., Plaintiff, v. ENDURANCE ASSURANCE CORPORATION, Defendant.

C.A. No. N20C-01-088 EMD CCLD

SUPERIOR COURT OF THE STATE OF DELAWARE

Submitted: August 4, 2020

October 29, 2020

Upon Defendant's Motion to Dismiss or Stay this Action

DENIED

Upon Plaintiff's Motion for Partial Summary Judgement

GRANTED in part and DEFERRED in part

Jennifer C. Wasson, Esquire, Carla M. Jones, Esquire, Potter Anderson & Corroon LLP, Wilmington, Delaware, Robin L. Cohen, Esquire, James H. Smith, Esquire, McKool Smith, P.C., New York, New York. Attorneys for Plaintiff SS&C Technologies Holdings, Inc.

Marc S. Casarino, Esquire, White and Williams LLP, Wilmington, Delaware, Kimberly M. Melvin, Esquire, John E. Howell, Esquire, Matthew W. Beato, Wiley Rein LLP, Washington, D.C. Attorneys for Defendant Endurance Assurance Corporation.

DAVIS, J.

I. INTRODUCTION

This insurance coverage dispute is assigned to the Complex Commercial Litigation Division of the Court. On January 10, 2020, Plaintiff SS&C Technologies Holdings, Inc. ("SS&C") filed suit against Defendant Endurance Assurance Corporation ("Endurance") for breach of an insurance policy, the Premier Professional Liability and Network Risk Insurance Policy (the "Policy") issued by Endurance to SS&C. SS&C's complaint (the "Complaint")¹asserts two causes of action: (i) breached the terms of the Policy ("Count I"); and (ii) breached its implied covenant of good faith and fair dealing ("Count II"). Endurance defends on the basis that the liability at issue arose from unfair trade practices and the return of fees which are excepted from indemnification under the Policy.

SS&C filed a Motion for Partial Summary Judgment (the "Summary Judgment Motion").² Thereafter, Endurance filed a Motion to Dismiss or Stay this Action (the "Motion to Dismiss").³ The parties fully briefed the motions. The Court held a hearing on the Motion to Dismiss and the Summary Judgment Motion on July 7, 2020.⁴ After the hearing, the Court took the motions under advisement. On July 30, 2020, Endurance's counsel provided the Court with an update on the Connecticut Action (as defined below).⁵ On August 4, 2020, SS&C's counsel advised the Court of the status of the Declaratory Judgment Action.⁶

For the reasons set forth below, the Court will DENY the Motion to Dismiss. On the Summary Judgment Motion, the Court will GRANT in part and DEFER in part the relief sought.

II. RELEVANT FACTS⁷

A. THE POLICY

SS&C is a financial services company that offers software and software-enabled services to its clients, most of whom operate in the financial sector.⁸ SS&C maintains an insuranceprogram to protect against potential losses. The Policy at issue was issued by Endurance to SS&C for the "Policy Period" from April 30, 2017 to April 30, 2018.⁹ The Policy's "Limit of Liability" for Professional Services, Technology and Media Liability is $10,000,000, subject to a $1,300,000 retention.¹⁰

The Policy provides:¹¹

If Insuring Agreement A. is purchased as designated in Item 4. of the Declarations, the Insurer shall pay Damages and Claim Expenses resulting from any Claim first made against the Insured during the Policy Period and reported to the Insurer in writing during the Policy Period, or any applicable Extended Reporting Period, for any Professional Services Wrongful Act, Technology Wrongful Act or Media Wrongful Act committed on or after the Retroactive Date and before the Policy terminates.¹²

The Policy defines "Claim" "to include lawsuits that allege "Wrongful Act[s]."¹³ "Wrongful Act" encompasses a "Technology Wrongful Act," which means:

any act, error, omission, misstatement, misleading statement, neglect, breach of duty, or Unintentional Breach of Contract actually or allegedly committed or attempted by an Insured in connection with the Insured's rendering of or failure to render Technology Services or Telecommunication Services to others, or the failure of the Insured's Technology Products to perform the function or serve the purpose for which they are intended.¹⁴

"Technology Services" is defined as "any electronic or computer-based network services."¹⁵ "Technology Products" means "computer or telecommunications hardware, software, firmware, or related electronic equipment, including the design, development, manufacturing, assembly, distribution, licensing, leasing, sale, installation, repair or maintenance thereof."¹⁶

The Policy defines "Damages" as: (i) compensatory sums; (ii) monetary judgments or settlements; (iii) "punitive or exemplary damages or the multiple portion of any multiplied damage award, to the extent such damages are insurable under the law most favorable to the insurability of such damages of any jurisdiction which has a substantial relationship to [SS&C], [Endurance], this Policy, or the Claim;" and pre-judgment and post-judgment interest.¹⁷ Damages do not include "the return, reduction or restitution of fees, commissions, royalties, expenses or costs for Professional Services or Technology Services performed or to be performed by the Insured"¹⁸ which the parties refer to as the "Fees Carve-Out."¹⁹

Section II, Item H, as amended by Endorsement Number 14, also limits indemnification. First, the Policy does not cover the "return, reduction or restitution of fees, commissions, royalties, expenses or costs for Professional Services or Technology Services performed or to be performed by the Insured."²⁰ The Policy also does not cover "matters uninsurable under the law pursuant to which this Policy is construed...."²¹ Section III(K) of the Policy contains an exclusion for "'any Damages or Claims Expense based upon, arising out of, attributable to or involving directly or indirectly . . . any actual or alleged false, descriptive or unfair business practices or any violation of consumer protection laws.'"²²

B. THE ARMOUR ACTION

In May of 2014, SS&C began negotiating with ARMOUR Capital Management LP ("ACM") to provide and to install SS&C's CAMRA software as a comprehensive solution for managing ACM's client's mortgage-related securities portfolios. SS&C and ACM entered into aservices agreement in December 2014. Under this agreement, SS&C licensed its software to ACM. In addition, ACM hired SS&C to implement the software for ACM. SS&C encountered multiple issues throughout the course of installation, which delayed the process.

In May 2017, ACM terminated the agreement and brought suit (the "Armour Action") against SS&C in the United States District Court for the District of Connecticut New Haven Division.²³ In the Armour Action, ACM alleged that SS&C: (i) breached the agreement: (ii) intentionally and/or negligently misrepresented SS&C's ability to implement the CAMRA software in order to induce ACM to enter into the agreement; and (iii) negligently and/or negligently misrepresented SS&C's progress and ability to implement CAMRA in order to induce ACM into releasing payments to SS&C and not terminating the agreement sooner. ACM also argued that SS&C violated the Connecticut Unfair Trade Practices Act ("CUPTA").

On January 6, 2020, ACM and SS&C settled (the "Settlement") the Armour Action after two years of litigation. The terms of the Settlement are confidential. The parties dispute whether Endurance had an opportunity to be fully involved in the Settlement.

SS&C contends that the Policy is designed to protect SS&C against the type of loss incurred as a result of the CAMRA implementation issues and the Armour Action. Endurance did advance defense costs related to the Armour Action but refuses to indemnify SS&C in connection with the Armour Action settlement. According to the Complaint, Endurance refused to indemnify/contribute to the settlement by relying on various provisions in the Policy. SS&C contends that all the provisions are inapplicable under the plain meaning of the Policy and the "court's orders in the Armour Action."²⁴ In the Motion to Dismiss, Endurance states that thePolicy does not cover "the return, reduction or restitution of fees, commissions, royalties, expenses or costs for Professional Services of Technology Services performed or to be performed by the Insured."²⁵

C. PROCEDURAL HISTORY

On January 9, 2020, Endurance filed an action against SS&C in the Connecticut Superior Court, seeking a declaration on the extent of the Policy's coverage (the "Connecticut Action").²⁶ On January 10, 2020, SS&C filed the Complaint. As stated above, the Complaints sets out two claims for relief. Unfortunately, the pattern of dueling litigations has once again been presented to the Court. As always, there is no indication that either the Connecticut Superior Court or this Court is not capable of readily adjudicating the litigation.

SS&C filed its Motion for Partial Summary Judgment on February 7, 2020. On April 8, 2020, Endurance filed its Answering Brief in Opposition to SS&C's Motion for Partial Summary Judgment. Endurance filed its Motion to Dismiss on March 4, 2020. On April 8, 2020, SS&C filed its Answering Brief in Opposition to Endurance's Motion to Dismiss or Stay the Action (the "Opposition").

III. PARTIES' CONTENTIONS

A. MOTION TO DISMISS

Endurance requests that the Court either dismiss or stay this case on the following grounds: (1) the Cryo-Maid forum non conveniens principle or (2) the McWane "first to file" doctrine. Endurance argues that Cryo-Maid applies because: (1) a formerly filed Connecticut action is pending, (2) the witnesses, documentary evidence, and previous Armour Action were,or have been mainly, located in Connecticut, (3) Connecticut law is controlling in interpreting the Policy because SS&C's principal place of business is in Connecticut, (4) the dispute falls under Connecticut contract and consumer protection law, and (5) the case will demand a judicial determination of Connecticut public policy.

In the alternative, regarding the McWane analysis, Endurance asserts its applicability by stating that: (1) the Connecticut Action was filed first, (2) the Connecticut Superior...